Low Voltage Products

The financial results of our Low Voltage Products division were as follows:

 

 

 

 

% Change

($ in millions)

2014

2013

2012

2014

2013

Orders

7,550

7,696

6,720

(2)%

15%

Order backlog at Dec. 31,

891

1,057

1,117

(16)%

(5)%

Revenues

7,532

7,729

6,638

(3)%

16%

Income from operations

1,475

1,092

856

35%

28%

Operational EBITDA

1,429

1,468

1,219

(3)%

20%

Orders

In 2014, orders decreased 2 percent (flat in local currencies) as order growth in most businesses was offset by the impact of the divestments of HVAC and Steel Structures. Order growth was highest in the Wiring Accessories business and orders also grew in the Breakers and Switches, Enclosures, and Control Products businesses while orders in the Low Voltage Systems business were steady. Product businesses grew despite a challenging macroeconomic environment in Europe, lower investments in the construction market in China and political instability in certain Eastern European countries.

Orders increased 15 percent (14 percent in local currencies) in 2013, driven primarily by the impact of including Thomas & Betts for the full year in 2013. In addition, orders grew moderately in most product businesses, while in the systems business orders decreased.

The geographic distribution of orders for our Low Voltage Products division was as follows:

(in %)

2014

2013

2012

Europe

39

39

43

The Americas

30

32

26

Asia

24

22

24

Middle East and Africa

7

7

7

Total

100

100

100

In 2014, the share of orders from the Americas decreased primarily due to the impact of the divestments in the year, which were mainly based in the U.S. and Canada. The share of orders in Asia increased, partially driven by systems orders in China.

In 2013, the share of orders from the Americas increased and the share of orders from both Europe and Asia decreased, due primarily to the impact of including Thomas & Betts for the full year in 2013, which operates primarily in the U.S. and Canada.

Order backlog

In 2014, order backlog decreased 16 percent (9 percent in local currencies), driven mainly by the impacts of business divestments in the year.

In 2013, order backlog decreased 5 percent (4 percent in local currencies), driven mainly by certain product businesses.

Revenues

In 2014, revenues decreased 3 percent (flat in local currencies) as steady to higher revenues in most businesses were offset by the impacts of divested businesses. Revenues grew slightly in the Breakers and Switches and Low Voltage Systems businesses while revenues were flat in the Enclosures and Control Products businesses.

In 2013, revenues increased 16 percent (16 percent in local currencies) primarily due to the impact of including Thomas & Betts for the full year in 2013. In addition, revenues grew in our product businesses, while revenues were lower in the systems business.

The geographic distribution of revenues for our Low Voltage Products division was as follows:

(in %)

2014

2013

2012

Europe

40

39

43

The Americas

30

33

26

Asia

23

22

24

Middle East and Africa

7

6

7

Total

100

100

100

In 2014, the share of revenues from the Americas decreased primarily due to the impact of divestments in the year. The share of revenues from Asia and MEA increased slightly, partially attributable to increased systems revenues in China and Saudi Arabia respectively.

In 2013, the share of revenues from the Americas increased and the share of revenues from both Europe and Asia decreased, due primarily to the impact of including Thomas & Betts for the full year in 2013.

Income from operations

In 2014, income from operations increased 35 percent, primarily due to gains from the sales of businesses divested in the year. Depreciation and amortization of $301 million was lower than 2013, due to the impacts of business divestments in 2014. However, income from operations was impacted by a negative product mix.

In 2013, income from operations increased 28 percent, due mainly to the impact of including Thomas & Betts for the full year in 2013 and also due to the inclusion in 2012 of $106 million of acquisition-related expenses and certain non-operational items (which mainly included certain employee-related expenses and transaction costs for Thomas & Betts). Depreciation and amortization of $323 million was higher than in 2012, due primarily to including Thomas & Betts for a full year. In addition, the change in geographic distribution of revenues in 2013, as well as a different revenue mix between products and systems, increased profitability.

Operational EBITDA

The reconciliation of income from operations to Operational EBITDA for the Low Voltage Products division was as follows:

($ in millions)

2014

2013

2012

Income from operations

1,475

1,092

856

Depreciation and amortization

301

323

250

Restructuring and restructuring-related expenses

45

31

23

Gains and losses on sale of businesses, acquisition-related expenses and certain non-operational items

(407)

16

106

FX/commodity timing differences in income from operations

15

6

(16)

Operational EBITDA

1,429

1,468

1,219

In 2014, Operational EBITDA decreased 3 percent compared to 2013, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.

In 2013, Operational EBITDA increased 20 percent compared to 2012, primarily due to the reasons described under “Income from operations”, excluding the explanations related to the reconciling items in the table above.

Fiscal year 2015 outlook

The global demand outlook for 2015 in our key industry and transport and infrastructure markets varies by region and sector. There are some positive indicators in North America and slow growth in Europe is expected to remain. Economic growth in China is forecasted to continue. Customer spending to improve industrial and building efficiency is expected to support the business in 2015, along with further investments in electrical marine propulsion and rail transport.